Pittsburgh PUC Asks Utilities to Reveal Auditing Practices

Pittsburgh-area utilities will be complying with an order from the state Public Utility Commission to reveal and review their auditing practices.

In light of the Enron scandal, PUC chairman Glen Thomas launched a review of major Pennsylvania utilities' auditing practices. Enron is the Texas-based energy, commodities and services company that filed for Chapter 11 bankruptcy reorganization after allegations of illicit internal and external auditing procedures surfaced.

During his address at February's meeting of the National Association of Regulatory Utility Commissioners, or NARUC, Thomas announced that the PUC's Bureau of Audits would be sending out surveys.

"While we have always conducted management audits of our utilities, the Enron case tells us we must do more," Thomas said at the event. "We will take a hard and comprehensive look -- codes of conduct, financial reporting, external and internal auditing, and limits placed on internal auditing by senior management. We want to find any problems so we can correct them before they become a crisis -- or an `Enron.'"

Washington, D.C.,-based NARUC is a nonprofit organization that seeks to improve the quality and effectiveness of public utility regulation.

Since NARUC's members include the public utility commissions in all 50 states, NARUC legislative director Chris Mele said it supports Thomas' review of utilities' auditing procedures.

The PUC mailed the questionnaires to about 25 of the largest electric, natural gas and water utilities in the state on Feb. 22. The 10-page survey has 46 questions. Firms have several weeks to return the survey.

PUC spokesman Tom Charles could not estimate the cost to the PUC to review the questionnaires, but said it will be a priority.

"Our bureau of audits will review them and it may lead to visits (to the utilities) from audit staff," Charles said. "We want to see what they have in place. We've always done annual audits of all aspects of various utilities. This is sort of an extension of that. It may lead to more."

Charles said results could reveal good news as well.

"If there are some things the companies are doing right, we want to acknowledge that."

There are no penalties for companies that don't respond, but Charles said the PUC will follow up with each utility that received a questionnaire.

Of the four utilities contacted about the surveys, all said they will comply with the PUC's requests.

"It's our understanding this is merely a survey and we don't anticipate this will have any effect on customers or that this will impose any additional regulations at this time," said Downtown-based Equitable Resources Inc. spokeswoman Cindy Jergan.

Allegheny Energy communications manager Janice Lantz said the company is not sure how much work the questionnaire will involve, but the Maryland-based firm with local offices in Greensburg, believes it is prepared.

"In a company like ours, there are lots and lots of steps you have to go through to get financial records approved," she said.

PricewaterhouseCoopers is Allegheny Energy's outside auditing firm.

Downtown-based Duquense Light Co. spokesman John Laudenslager said it also has significant auditing processes in place.

"But, certainly, we would look to improve or enhance those as appropriate and as directed by the PUC," Laudenslager said.

Like the rest of the utilities, Downtown-based Dominion Peoples does internal and external audits annually, said spokesman Elmore Lockley. Additionally, the PUC conducts an audit of Peoples' gas cost procedures every two years and of its management structure procedures every seven years.

"From an ethical standpoint we always take a look at ourselves on a regular basis," Lockley said.

Both Duquesne Light and Dominion Peoples use Deloitte & Touche as their external auditors.

While checks and balances may be in place, Enron fell because of an internal corporate scandal, which NARUC's Mele said could happen anywhere.

"If there isn't truly independent scrutiny of books and records, I suppose that it's possible for any corporate entity to engage in the skullduggery that Enron has," Mele said.

"If the auditors aren't doing their job, I'd imagine it was possible in any corporation."